One of the area’s leading Realtors provides his thoughts on the direction of the residential housing market in the counties of Chester, Delaware, Montgomery & Philadelphia.
WAYNE -- With so much uncertainty in the world today, Brett Furman, Broker/Owner of RE/MAX Classic decided to introduce a monthly marketing report focused on trying to understand what is going to happen when the stay at home orders are lifted.
Pennsylvania is the ONLY state in the country that defines real estate as non-life-sustaining which forced real estate companies to close their physical locations and stop showing houses during the COVID-19 pandemic. That only left Realtors with virtual selling methods if they wanted to continue to sell homes.
“My recent study compared the rate of agents that were using virtual tours versus those that used them in 2014” Furman stated. The results revealed that these methods were still not being used by 65% of all agents, making it very hard for most owners to sell their homes right now since they don’t have a virtual tour.
While we could argue that housing is a vital part of people’s lives, we can better explain the factors by looking at the statistics Furman gathered. Buyers can pick from 8,382 homes that are available in Chester, Delaware, Montgomery & Philadelphia Counties. These four counties had 41,806 homes sold over the past 12 months with significant price increases!
While this data would be contrary to what you would think, we are clearly in a sellers’ market based upon very low absorption. Mr. Furman explained this statistic, “On the average right now it will take the market 66 days or about two months to absorb or sell the inventory. This does not mean your home will be sold in 66 days if you put it on the market, but rather this is my barometer to measure how the market is doing.”
Brett Furman Group offers this analysis for every single property they list for sale. “This data is critical!” stresses Furman, adding “Before you can discuss a price strategy, you must understand this analytic.”
The best way to figure out what will happen when the stay at home order is lifted is to examine shadow inventory, which is broadly defined as homes that are temporarily off the market. Shadow Inventory refers to homes that sellers previously had on the market and have decided to temporarily remove them from the market. They did this for two reasons: They did not want anyone traipsing thru their property; They did not want to toll days on the market since agents were not permitted to conduct home tours.
Mr. Furman identified 1,859 shadow inventory homes which represent about 22% of the active inventory. If all these homes came on the market right now, the absorption would increase from 66 days to 78 days or 2.6 months which is still very good.
So, what’s the catch? The catch is the second type of shadow inventory, which is the unknown shadow inventory. These homes have not been on the market previously, but will come on the market, except we don’t have any way to quantify the amount.
Unknown Shadow Inventory includes 5 categories. Spring sellers that delayed getting their home on the market due to the coronavirus outbreak. People that have been stuck in their home for several months and decided that the home they are living in does not work anymore. Shelter in place has forced couples to spend time together and could spike divorce rates which could lead to home sales. Investors that were doing short term rentals like Airbnb, that are now empty, may be forced to sell. Those that have lost their job and are economically challenged may be forced to sell.
What does all this mean? Buyers will benefit from low interest rates but may have challenges finding a home. Sellers will benefit from increased pricing and minimal competition, all due to Brett Furman’s barometer previously mentioned, known as absorption. The market could shift from a seller’s market to buyer’s market, depending upon how much shadow inventory comes to market. Therefore, Furman suggests “An offer today may be worth more than an offer tomorrow!”
The video concludes with a message from Brett Furman to remain safe, practice social distancing, and stay tuned to next month’s market report. Coincidentally, as the MMR prediction video was released on May 19th, Governor Tom Wolf announced real estate agents could begin practicing their business again that same afternoon.
For more information about the evolving marketplace or Brett Furman Group, please call 610-687-6060 or visit www.BrettFurman.com. The May 2020 Monthly Marketing Report can be viewed in its entirety by visiting: https://youtu.be/ObhY2QKPla0